A long-proposed beachfront luxury hotel in downtown Oceanside could finally be built if the city agrees to sell the property to the developer for $1.5 million and provides about $13 million in subsidies. The seemingly sweetheart deal has angered at least one community activist.

The deal will be presented on Monday to the city’s Economic Development Commission but it will be up to the City Council to decide whether to accept the deal, possibly in early September.

The city and S.D. Malkin Properties entered into a 2009 agreement to build the project. But the developer told the city in 2011 it need more time to finance the $200 million project.

When the state dissolved city redevelopment agencies two years ago, the deal became even more complicated.

City officials say the new proposed agreement would kick-start the project again and help revitalize the downtown area.

Under the terms of the proposal, the city would sell the property — bounded by Pacific Street on the west, Myers Street on the east, Seagaze Drive on the south and Pier View Way on the north — for $1.5 million. The property is divided roughly in half by Mission Avenue.

The city would also provide $13.6 million in subsidies, primarily in the form or $11.3 million in transient occupancy tax rebates over 15 years. Under the deal, the developer would keep all hotel tax revenues the first three years of operation, but the city will get a share in subsequent years and the city will retain all hotel tax revenues after 15 years.

S.D. Malkin would build a Westin or Hyatt Regency branded resort with 225 rooms on the lot south of Mission Avenue and at least 135 rooms on the north lot. The project would stand six stories high on the south side and eight stories on the north side.

The project would also provide 36,000 square feet of public open space and 18,500 square feet of commercial space. The Top Gun house, an 1887 Queen Anne Victorian home used for some location shots in the 1986 film “Top Gun,” would be incorporated into the north side of the development.

Community activist Nadine Scott questioned why the city was selling the property at such an apparently low price.

Former City Manager Peter Weiss, now a consultant for the city, said the city is limited on how much it can ask for the land because it was purchased with special bonds.

“Under federal law, the (city) is restricted in how much it can sell the property for without jeopardizing the tax-exempt status of the bonds,” Weiss said.

A law firm hired by the city in May determined that $1.5 million was the most the city could ask for the land.

“If our hands are tied and (we) are having to sell (the land for $1.5 million), why are we giving them any subsidies?” Scott asked.

Weiss said the new agreement would cut the subsidies in half. The previous agreement between the developer and the city’s redevelopment agency would’ve require the city to contribute about $27 million toward the project to pay for improvements such as a parking garage.

Councilman Jerry Kern said that while the price for the land may appear low, the city will ultimately benefit through tax revenue and tourism.

“We’re becoming a tourist town with tourists that leave money here,” Kern said. “This is a good thing and that’s what we’ve always wanted. We can continue shopping (the project) around. We can wait another 15 years and miss another opportunity.”

According to a staff report, the finished project will generate an estimated $3.4 million in hotel room taxes a year.

The Economic Development Commission will meet at 3 p.m. Monday at City Hall, 300 N. Coast Highway.